Q1 2021 Socket Mobile Inc Earnings Call

Okay.

Welcome to the Q1 'twenty 'twenty, One management conference call management is on the call from socket mobile cash.

Ken Mills, President and CEO, along with Linzess CFO My name is Adrian and I'll be your operator for today's call.

Before we begin I'd like to remind everyone of this conference call may contain forward looking statements within the meaning of section 27 day of Securities Act.

933, as amended and section 21 E of Securities Exchange Act of 1934 as amended.

Such forward looking statements include but are not limited to statements regarding mobile data collection of mobile data collection of products.

On the timing distribution and market acceptance of products and statements predicting the trends.

The market conditions and the opportunities in the markets in which socket mobile sells its products such statements include risks and uncertainties and actual results could differ materially from the results anticipated in such forward looking statements because of the number of factors, including but not limited to the rest of the manufacture of sockets products may be delayed.

Or not rolled out as predicted due to technological market or financial factors, including the availability of product components and necessary working capital the rest of the market acceptance and sales opportunities may not happen as anticipated.

The socket the application partners and track distribution channel may choose not to distribute the products or may not be successful in doing so the risks the acceptance of the sockets products and vertical application markets may not happen as anticipated as well as the other risks described the sockets. Most recent form 10-K on turnkey report.

Thousands of Securities and Exchange Commission socket does not undertake any obligation to update forward.

Forward looking statements at this time all participants are in a listen only mode. Later will conduct a question and answer session.

The question and answer session. If you have a question. Please press Star then one on your Touchtone phone.

Please note. This conference is being recorded on I'll turn the call over to Kevin Mills, President and CEO, Kevin you may begin.

Thank you operator, good afternoon, everyone and thank you for joining us today.

Our first quarter revenue was 4.8 million of 14% over $4 2 million in the first quarter of 2020.

Net income for the first quarter of 2021 was $203000 or <unk> per fully diluted share compared to a net loss of $90000 or a loss of one per fully diluted share in the first quarter of 2020.

Lynn will provide a more detailed breakdown of our results in a few minutes.

In Q1, our revenue was driven by our retail centric customers led by Shopify square.

Our retail centric business is benefiting from the reopening of the economy as the Covid restrictions are eased.

I would also like to share the customers' requirements are a bit different post pandemic.

Customers are more interested in the mobile system support of indoor and outdoor operations, especially on the hospitality related activities.

Making an iPad based solution much more attractive.

We are also seeing greater interest in shopping <expletive>istance and one on one customer interactive solutions in retail.

These solutions allow a customer to avoid QE and checkout via sales <expletive>ociates.

These new requirements bode well for our mobile centric application driven business model.

We're also seeing good demand from commercial services type customers, who deliver inspection services and other field services.

We expect the commercial services segment of our business to continue to grow strongly this year.

Yeah.

The strong demand we saw in Q1 should continue and potentially increase during 2021.

However, I must also point out there are real supply chain issues in the world today and these issues may impact our ability to deliver during the year.

Component lead times have balloon.

With some parts of lead times going from two weeks to four months overnight.

Ensuring we have the components, we need remains of daily challenge.

Currently we have sufficient supply commitments to be confident of having a solid Q2.

And we are working very hard to ensure supply issues do not impact Q3 of our Q4.

But it is the challenge.

We will continue to provide update on the supply situation on our quarterly calls.

In Q1, we also entered into a technology transfer agreement with spring card SaaS.

The market leader in the contactless field.

Under the deal we acquired the perpetual royalty free license to the current technology.

The Juris <unk> 600, and socket Scott S $5 50, contactless reader writer of products.

We believe there will be a strong demand for contactless readers as the world Reopens post COVID-19.

That's why we moved aggressively to secure the technology, we need to deliver these products.

As I have said many times nobody writes software for hardware that doesn't exist.

So we need to book, we need to provide the hardware to our customers. So they can develop their applications.

Our initial contactless centric market focus was lloyd timber leases.

The market opportunity has grown considerably due to COVID-19.

There is a new potential contactless requirements.

Covid health p<expletive>ports, which if adopted are likely to end up in mobile wallets on your phone.

Should this happen. The F 550 is the ideal contactless reader for reading your Covid p<expletive>port status and p<expletive>ing the information to the controlling application.

The past few months. The S. 550 was used in several of the Covid bubble of trials where the.

With thousands of mobile p<expletive>es on worked exceptionally well.

Based on these field trials, we are very confident about its capabilities and effectiveness.

Today, our focus is completing our development tools, which support both our scanners and contactless readers and providing these tools to our developer partners. So our scanners on contactless readers can be integrated into their solutions.

Assuming COVID-19 p<expletive>ports become a reality.

Many businesses from theaters restaurants Tonight clubs will need to determine your COVID-19 status before entry.

The ex $5 50 is already fully Apple and Google wallet certified so it can read mobile p<expletive>es directly from your call as well as from tradition of contactless cards.

So in summary.

Q1 was good and we expect to see strong demand for our products as the world Reopens.

We have supply issues like everyone else and are working hard to ensure these issues don't impact our customers.

And our <expletive>ociated revenue.

We are seeing a much more significant contactless reader opportunity on the horizon and are working hard to be a significant player in this emerging opportunity.

With that said I'd now like to turn the call over to our CFO Lynn Zhao lit.

Thank you Kevin.

In addition to delivering a corner, ladies and solid revenue growth. We continue the two manager.

Our operating cost and the expenses, while investing actively in new products and then building that existing products you can drive profitable growth.

The gross profit margin was 53, 5% increase to the 0.8% from the first quarter of plenty of time.

Our Q1 operating expenses of $2 $3 million is the at the same level as Q1 2020, but their expense to revenue ratio is the lower to Q4 of the apex of compared to two 5% a year ago.

All the liquidity has been further strengthened on March 30, <unk>, our cash balance on the buyback dollars compared with the Q2 dollars 8 million on December 31st 2020 of the.

The increase is attributed to the profitable operations the extra.

The size of all of employee stock options and the funding of the non formula alone.

The acquisition of Sprint car. The technology is the reported SMB intangible instead of 419 million on March 31st the financial statements.

Our auditors have.

Of the conducted a thorough review of the valuation that the company determined and the agreed on the valuation.

In Q1, we renewed our credit facilities with our bank and the extended the maturity date to January 2023.

With the new agreement the domestic line of credit was increased to two of $3 million that includes $2 million revolving credit facility and the 1 million down from year ago.

Our <expletive>ets credit facility of <unk>.

$5 million of remains in place.

We will hold our annual shareholder meeting on Thursday May 13 at 10 30 a M.

The meeting will be in a virtual meeting format.

<unk> obtained the meeting link please send an email request to proxy materials and socket mobile dot com.

The voting results will be collected and pallid prior to the meeting.

We will file a form 8-K to reported the results after the meeting.

The results will also be posted on our website.

Now I will turn the call over to the operator for your questions.

Operator.

Thank you well now begin the question and answer session.

The question. Please press Star then one on your Touchtone phone.

If you wish to be moved in the queue. Please press the pound sign or the ASCII.

The delay for the first question to announce on skin. If you the question.

Please press Star then one on your Touchtone phone.

Currently we have no questions kind of you'd like to enter the queue. Please press star one.

And we have no questions.

Okay. Thank you. Thank you operator, so I'd just like to wish everyone. A good afternoon and thank you for participating in the call and I'd also like to at the at the Gen Z to thank our employees for the.

Can you commitment and support.

Thank you again good afternoon.

Thank you ladies and gentlemen. This concludes today's conference call. Thank you for participating you may now disconnect.

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